What's In Store for Embedded Finance?

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The spread of digital technology and infrastructure has given rise to fintech, but it’s also driven the popularity of non-financial services like social media apps, gig platforms, and e-commerce sites. The term “embedded finance” refers to the integration of financial tools into this growing array of services. Just as mobile money brought payments closer to low-income customers via their phones, embedded finance has the potential to bring a whole range of financial services even closer. The opportunities this presents to advance financial inclusion are almost endless and may define financial inclusion for years to come. But what forms will embedded finance take? What are the biggest opportunities and risks? And what players are driving it in different regions? In this episode, we take a look at what lies ahead for embedded finance.

This is the second episode in CGAP's new podcast, Inclusive Finance Frontiers

Featured Voices

Ana Maria Zuluaga Tafur, Head of Innovation Group, Superintendencia Financiera de Colombia 
Laura Crow, Head of the financial services team, M-Pesa Africa
Pui San Chay, Director of Public Affairs and Policy, Grab 
Peter Zetterli, Senior Financial Sector Specialist, CGAP 
Patrick Meagher, CGAP Consultant


Sai Krishna Kumaraswamy: Hello and welcome to Inclusive Finance Frontiers, presented by CGAP, a global partnership that works to advance the lives of people living in poverty through inclusive finance. I'm your host, Sai Krishna Kumaraswamy, a GGAP financial sector analyst, here with my co-host Yasmin Bin-Humam. Hi, Yasmin.

Yasmin Bin-Humam: Hi, Sai.

Sai Krishna Kumaraswamy: So as you know, there has been a rapid explosion of digital technologies and infrastructure in emerging markets. This has allowed the provision of technology-enabled financial services, also known as FinTech.

Yasmin Bin-Humam: So to give an example of FinTech, when we go for lunch and I send money from my phone to your phone to split the costs, is that an example of FinTech?

Sai Krishna Kumaraswamy: Yes. Digital payments between individuals is a classic example. But as the provision of non-financial services also digitize, think of online e-commerce platforms, remote gig work platforms. We see that providers are able to integrate financial tools into the provision of these other services. This is often known as banking as a service, or embedded finance.

Yasmin Bin-Humam: So to me, embedded finance sounds intriguing but complicated to pull off. Is that the case?

Sai Krishna Kumaraswamy: It can be. Innovative FinTech providers are very good at designing products like digital credit, buy now, pay later, or credit scoring algorithms. But these providers lack the skill and the distribution networks of incumbent providers like banks or microfinance institutions.

Yasmin Bin-Humam: So an example of embedded finance might be if I go online and I buy seeds to plant tomatoes in my garden. And by the way, I've actually brought some tomatoes from my garden for you today. We can see if you like them later! And I choose the option to pay in installments over time through the websites. I'm combining digital credit and a digital payment option, which are probably facilitated by a company that's not the same company that's providing seeds. Is that right?

Sai Krishna Kumaraswamy: That's right. Embedded finance helps several players come together and combine their strengths. It enables a whole new generation of innovative players to leverage the foundations laid by more established companies to reach new scale and new customers, including low income customers. This also makes sense from a business perspective, which is probably why we are going to see many more players come together in the future.

Yasmin Bin-Humam: So presumably, this could extend financial services digitally to people who previously didn't even have checking accounts.

Sai Krishna Kumaraswamy: That's right. Some experts believe that embedded finance will define financial inclusion to come, but it remains to be seen what form embedded finance will take. Where are the opportunities, what are the risks involved, and which players are driving it in different regions. In this episode, we take a look at the future of embedded finance. We spoke with experts both within CGAP and elsewhere to learn about the history of digital innovation, understand where the big opportunities in embedded finance are, what are the risks it poses, and how policy makers are thinking about these emerging business models.

Yasmin Bin-Humam: I'm curious to hear it.

Sai Krishna Kumaraswamy: Let’s start by going back in time—nearly 15 years—to the early 2010s. This is when the growing popularity of mobile phones and emergence of mobile money changed everything in financial inclusion.

Peter Zetterli, a senior financial sector specialist at CGAP, who has worked in the financial inclusion space for almost 20 years, says that the emergence of mobile money kicked off a “first wave” of digital innovation in financial inclusion.

He says mobile money was born in Kenya around 2007 and it basically pioneered a new way for people to store and send money to one another.

Peter Zetterli: CGAP was early to recognize the potential for financial inclusion that was inherent in mobile money. People didn't need to live near a bank branch or have the formal kind of paperwork that you would need to open a bank account in order to use formal financial services. All you needed was to have a mobile phone and have a corner store agent nearby where you could get cash in and out of the system. You could have a formal financial account and participate in the formal financial system. This was a complete revolution of financial access across the world - and certainly, across Africa. In the 10-15 years that have passed since then, we have now racked up around 1.3 billion mobile money accounts around the world. The vast majority of which belong to people who previously had no access to formal financial services.

Sai Krishna Kumaraswamy: The advent of mobile money required a lot of hard work behind the scenes to ensure stakeholder collaboration and an effective customer awareness campaign, but the result was an incredibly successful financial solution. Peter says that it was a true win-win solution across different stakeholder groups:

Peter Zetterli: The potential to achieve development objectives was very clear from the start, but the business case for mobile money was also relatively clear early on. CGAP and GSMA among others worked hard in the early days to, to demonstrate that business case and show it to mobile network operators. And the fact that there was such a clear and compelling argument for them out of pure commercial self-interest to move in this direction was what gave it so much momentum from the industry side of the spectrum. So, there was a clear win-win across the social development objectives of the funder community and the development organizations and the commercial objectives of the mobile network operators. The third interested party of course, is the financial regulators who, who were a bit more on the sidelines initially and it took a little convincing. But also, quickly saw that this model was going to help them achieve the financial inclusion objectives that most of them at that point had already started to articulate and enshrine in national financial inclusion strategies.

Sai Krishna Kumaraswamy: Mobile money was indeed a big leap forward for financial inclusion, particularly in Sub-Saharan Africa, where it proved more popular than in other regions. Today, there are over 1.3 billion mobile money accounts worldwide, the majority of which belong to people who didn't have a formal financial account before. But now, fast-forwarding to today, we have more perspective on the limitations of that first wave of digital innovation.  

Peter Zetterli: The way I tend to describe what we've seen in financial inclusion through mobile money is a financial access that is broad, but shallow. So, a large number of people have gained access to the formal financial system. They've gained access to formal accounts and to payments, but it is shallow in the sense that they have not been able to reach more deeply to access a range of credit products, savings products, insurance products, investment products, you name it that, that people need to manage their day-to-day financial lives. So mobile money has been extraordinarily successful in creating that breadth of access but has not been very successful in creating the depth of access that we want.

Sai Krishna Kumaraswamy: This may be about to change. Some believe we’ve entered a “second wave” of digital innovation that could deepen financial inclusion beyond what mobile money has been able to achieve. “Embedded finance” is the integration of financial services into other financial and non-financial apps and services and is one of the concepts that characterizes the second wave of innovation.

Peter Zetterli: The way I define embedded finance is simply financial services that are seamlessly integrated into a nonfinancial context. The simplest example might be in e-commerce. If you're buying something online, you go to checkout. Oftentimes these days, there's an offer for financing so that you can spread the cost of your purchase over multiple installments that might help you with cash flow. It might let you be able to make larger purchases that otherwise you wouldn't be able to afford. That is a credit product that is seamlessly embedded into the checkout process of the e-commerce platform. You can also have insurance products that you can seamlessly tack on to the purchase so that you get an extended warranty on the thing that you're buying. In ride hailing, there is accident insurance that is automatically activated for the driver and for the passenger, at the start of a trip. Which might be reassuring if you're getting on a motorbike in downtown Jakarta in rush hour traffic there are many kinds of working capital financing products both in online e-commerce and in offline commerce, as in the case of corner store merchants that are able to access working capital purely on the basis of the cashflow that's visible through their digital payments

Sai Krishna Kumaraswamy: So, why does this matter for financial inclusion?

Peter Zetterli: Firstly, it brings financial products and services much closer to people, making them easier to access precisely where and when they're needed. It also tends to make the products more relevant because they're designed to fit within a specific country. They are often easier to use because they're paperless. They tend to be heavily automated, and they're offered in a context and within a user interface that the customers are already familiar with. So, there's nothing they need to learn. And finally, it can bring down costs because the financial service provider on the backend is basically offered a customer more or less free of charge.

They can offer data from the platform to make a low-cost risk assessment of the client and the digital consumer company that is the front end can offer a financial service without the time and capital involved in getting a banking license.

All of which is extremely significant for financial inclusion, since it corresponds to the main barriers that people tend to face – access, cost, product fit, and experience. We know that this is not just a hypothesis, because we've just concluded our own research with over a thousand customers of these kinds of companies across four markets in Asia. 

Sai Krishna Kumaraswamy: This research has shown a very clear impact on the financial lives and wellbeing of these clients.

Peter Zetterli: More than half of customers we spoke to say that this is the first time they access the kind of services they were getting through that company and that they could not easily find a good alternative in the market, clearly indicating that their financial access is being expanded, thanks to these models. More than half of these customers also say that their ability to manage their finances has improved and their financial stress has fallen, thanks to these services. And most impressively of all, three out of four clients say that their quality of life has increased as a result of the financial services that they're getting access to through these companies.

We were very interested to use our fresh data to explore any gender differences in the potential of these embedded finance models to expand financial inclusion. the potential seems to be fairly equal across men and women.

Sai Krishna Kumaraswamy: Now, there is a lot that’s positive about this move to embedded finance. But it does not come without some significant risks to consumers. Not least of which is how customer data is being used. We’ll hear more about this later. First though, let’s talk about the opportunities.

Two main developments over the last decade are converging today and laying the foundations for embedded finance to drive financial inclusion.

The first one is about the customer base. The different types of players around the world have been building large customer bases and distribution networks that can be leveraged to deliver a range of services beyond what they have delivered historically. These can now be leveraged to deliver a range of services beyond what they have delivered historically – and this range of new services includes financial services. In Africa, the foundation has primarily been laid by mobile money providers. In Asia, it’s largely e-commerce and ride hailing companies:

Peter Zetterli: They have scaled very quickly across the region in a large number of countries and are very rapidly gaining the sort of uptake on digital customer accounts, including payment wallets, as well as physical distribution through the network of drivers and stores that they have on their platform similar to the mobile money agents and customers in Africa. So, we're seeing the same combination of a very large customer base, digital channel to that customer and a sizeable physical distribution network. But in the case of Africa, it's driven by mobile money. In the case of Southeast Asia, it is driven by ride hailing and delivery companies.

The ride-hailing and delivery companies see a similar opportunity to the mobile money providers in that they recognize that there is a big unmet need for financial services across large segments of the populations in the countries where they operate. They tend to see things a little bit differently in that they are often using financial services specifically to drive the core business. For the mobile money providers, the financial services opportunity is a standalone opportunity in some ways, whereas for the ride hailing and delivery companies, same as for the e-commerce companies, it is more a means to an end, namely to drive more sales in the core business. So, they tend to be a bit more focused in the specific financial products and services that they embed and how they embed them into their platforms.

Sai Krishna Kumaraswamy: Meanwhile, Latin America has been taking its own unique path. Ana Maria Zuluaga is the Head of Innovation Group at the Superintendencia Financiera de Colombia, responsible for overseeing financial regulation in Colombia. She mentions the example of Colombia, where embedded finance has come to the forefront through Rappi, a super app that offers users home delivery of orders placed in restaurants, pharmacies, stores, supermarkets, and even other establishments without delivery service or that have a direct partnership with the software. Rappi has also been expanding to other services like payments, mobility, and others. It is one of the main players of digital transformation in Latin America.   

Ana Maria Zuluaga: Rappi they see the potential that to offer E-wallet in this marketplace, so they make an Alliance with Bank Da Vivianda and with a solution that Banque have that is called Davi Plata. Two, three years ago, Rappi starts to develop and to talk with the financial superintendents to take a formal financial licensing. So, they now have the Licensing, and they are now a financial institution that is able to provide the electronic deposits and credit and, but also, it's a marketplace.

Sai Krishna Kumaraswamy: So, while different industries have been driving this phenomenon in different regions, globally, the result is very similar – large customer bases and infrastructure have built. The second key development in the last ten years that has set the stage for embedded finance to drive financial inclusion has been an explosion of tech-savvy providers who offer financial and non-financial services that meet a wide range of consumer needs. Peter Zetterli explains that there are broadly three groups of players pursuing embedded finance opportunities from different vantage points:  

Peter Zetterli: One is the banks themselves. The banks are recognizing that there's a big opportunity just staying on the back and having partners bring the customers to you. The second set of players is those front-end players.

The second set of companies tends to be very large digital consumer companies, often platforms in the e-commerce ride hailing and so forth space. I would include mobile money providers in that category. Since they very much have a large customer base, they have a cheap digital channel to the consumer, and they have a large physical distribution network through which they can reach the consumers.

The third group is the FinTech startups that are innovating on product. There are many very exciting things happening on financial services, at the moment. They tend to have the technology to do things that financial service providers traditionally have not been able to do. They tend to bring a lot of new ideas and a lot of new energy. What they don't tend to have is a banking license and a balance sheet, or a large customer base that they can easily reach with those products.

Sai Krishna Kumaraswamy: Embedded finance enables these players to combine their strengths: that is, it enables a generation of innovators to leverage the foundations laid by established companies to bring new services to market at scale, including services for low-income customers. From a business standpoint, these types of partnerships often make sense, and the trend toward embedded finance looks set to continue. We are seeing a growing number of mobile money providers and others exploring these opportunities. In fact, research by Plaid and Accenture puts the market opportunity of embedded finance at $250 billion by 2025.

To better understand how these opportunities are playing out in the real world, we spoke to at two different companies, in two different parts of the world.

First M-PESA: Africa is home to a growing percentage of the world’s poor, and mobile money providers serve many of them. Traditionally, however, mobile money companies have struggled to expand their service offerings beyond payments for a of couple reasons. First, they face regulatory barriers. They are unable to offer banking services directly unless they are willing to become a licensed bank, and this is too onerous for most. Second, their core business models are based on transaction fee revenues. This works well for payments but can create issues when expanding into other financial products.

Laura Crow heads the financial services team at M-PESA Africa.

Laura Crow: We as an entity, we're not a regulated licensed provider of credit and savings. So, we partner with banks to be able to provide that. So not a deposit taking institution. We are limited in terms of kind of our voice at the table to influence as some of the product design that we would like to see. I think a lot of banks are relatively risk averse and it's been taking them a long time to kind of see the evolution, um, of the, kind of the mobile payments and mobile money story. And also, how to effectively kind of partner with us and counter some of their concerns that they have from a competition perspective as well.

So, I think we have been limited in terms of what we actually want to offer the customer because we haven't always been able to design a product, you know, that all our partners are happy with, and one that will we think will resonate with customers on the interface that's available. I think that situation is starting to change. I think our partners are becoming much more knowledgeable about this space. They obviously have more intent of their own to service these customers. I think they see the, the unbanked less as a risky proposition, but people that they want to start bringing into the ecosystem in partnership with ourselves and obviously, you know, app adoption is changing all the time.

Sai Krishna Kumaraswamy: M-PESA is developing a platform that banks can plug into for a range of credit services. This leverages their core payments service, their distribution network of digital channels and almost 600,000 agents, and rich customer data. These services range from merchant loans to pay-as-you-go consumer financing. The banks provide the balance sheet, banking licenses, and product design, while M-PESA provides the customer relationships, data, and distribution channels.

Essentially, the company is transitioning from being a payments service to being a financial platform where its 50 million customers, including half a million businesses that transact more than $7 billion a month, can access a wider range of financial services. Many of these customers are from low-income, financially underserved or excluded segments.

There are several key principles guiding why M-PESA has this kind of strategic aim and ambition.

Laura Crow: The first is to be super close to the customer. We want to make sure that, the way that we provide these services keep us close to the customer, understand their needs and what products they want in order to make sure, like we stay fully relevant to them. And also, to make sure we're collecting the data upon customers with the right permissions from them. So important in doing good product design and being able to give them more value in terms of the financial services we have on offer. So, we really need to be in a place where we don't get pushed into just being kind of one fulfillment layer of a platform, but we have enough capability kind of end to end to, to have that relationship with the customer.

If I just take an individual as an example, you might have someone that's saving to set up their own business. So, they're putting some money aside and then they get the opportunity to use some of that savings to gain additional loan to be able to set up a bike shop. Then from that they want to be selling them to other M-PESA customers and they can offer a discount to M-PESA customers if they go to their bike shop and purchase a bike from them. And it's through getting access to more sales that they're able to pay that loan off and get a higher credit limit to then maybe set up another branch somewhere else. And that same customer that's going to buy a bike, might again be using that for their own business, do better, be able to access markets to sell some of their goods.

So, overall, I guess what I see is this ecosystem where customers and businesses, it just getting closer together within M-PESA and being able to utilize it to create more value for themselves and just kind of what we're able to provide them, that they want to stick around with us, for the journey.

Second, I think is just a common kind of platform strategy and dynamics that you want to be in a position that it's much easier to build products, develop once and deploy to many and you'll be easy able to customize products, because there's a cost efficiency there and the benefits we can relate back to the customer and keep the adoption of our services.

Sai Krishna Kumaraswamy: Mobile money providers are far from the only actors exploring embedded finance, especially beyond Africa. Grab Financial started out as a ride-hailing platform and has grown into one of the largest “super apps” in Southeast Asia. Increasingly, it is embedding financial services into its platform for riders, drivers, and small businesses that use its core ride-hailing and delivery services. Pui San Chay is the director of public affairs and policy at Grab.

Pui San Chay: This year, Grab celebrates its 10-year anniversary as a company and the Grab app was first conceived as a way to solve the problem of safe taxi rides. So, our co-founder Ling wanted a safe way to get home at night, and she would pretend to be on the phone with a mom during late night drives to ensure her safety. So, while developing our mobile mobility solutions, we discovered that millions of Southeast Asians lacked access to basic financial services.

We had to help our drivers set up bank accounts to store their earnings after driving on Grab, and we've helped over a million of our partners open bank accounts, we identified a significant market opportunity to unlock financial access and create economic empowerment in Southeast Asia. Today, around 6 in 10 Southeast Asians are unbanked and 9 in 10 lack access to credit cards. Many don't have bank accounts either because they, number one, live in rural areas where they don't have physical access to banks. Number two, they don't know how to open a bank account or number three, they simply do not have enough awareness or trust in banking services, a large number of Southeast Asians also transact predominantly in cash.

This makes it difficult for them to build a credit history that would give them access to formal financial tools. So, we started as a company getting more involved in financial services in 2017 with the aim to provide financial products that are simple, transparent, and flexible. And we've not looked back since.

Sai Krishna Kumaraswamy: The pandemic accelerated the adoption of digital solutions across the region including financial services.

Pui San Chay: In 2020 alone, around 600,000 small businesses joined our platform to receive payments from customers who transacted online with them. We also helped a lot of new businesses establish a digital payment infrastructure as part of their business model.

And on the lending front, we helped many small businesses who were badly affected by lockdowns. We also see governments looking to platforms like Grab to disperse financial subsidies. For example, the Malaysian government partnered with us to disperse financial support digitally to Malaysians. There's so much more we can do. And I'm pretty sure we're just scratching the surface on what we can do with financial services in the region.

Sai Krishna Kumaraswamy: Grab made a great deal of progress in terms of having a large range of financial services. But they feel there’s so much more they can do.

Pui San Chay: Today, when I look at banking services in Southeast Asia, they can be quite inflexible, complex and sometimes confusing. Many banks also still require customers to enter a physical bank branch or transact with an automated teller machine or ATMs. We see banks of the future being totally branchless and ATM-less. We believe Fintech platforms can be successful because we won't be restricted by the lack of physical infrastructure or having to have to build new buildings and branches, even in the smallest towns in Southeast Asia to serve our customers.

We believe that anyone with basic internet should be able to open up an app to get the financial services they need all while sitting at home. And so, we hope to apply our expertise in digital and data and financial services to build a next generation bank that can provide simple, transparent and affordable services of Southeast Asians. And we're extremely excited to start this from Singapore, Malaysia in the coming years. I like to think of this next step in the same way as when we started out helping users access everyday services on our platform. And we want to make sure that we can improve our user's financial wellbeing and make it simple and open for all.

Sai Krishna Kumaraswamy: While there’s incredible potential to reap the rewards brought by the expansion of digital financial services, one of the barriers highlighted by Ana Maria is the digital divide.

Ana Maria Zuluaga: Here in Colombia, we have been working to offer better access and quality to the internet network. But this is a challenge as a world society. For example, we now have only 57% of households that have an internet connection, a fixed connection.

And Colombia is a big country. the principal cities, internet connection is huge is, could be 70%, but in the rural areas, we have a 24% internet connection. So, this is a public policy, government is working to improve this.

Sai Krishna Kumaraswamy: The gender divide adds another layer of complexity. According to the GSMA’s Mobile Gender Gap Report 2022, women are now 16% less likely than men to use the mobile internet, which equates to 264 million fewer women than men using mobile internet tools. 

Beyond these barriers, embedded finance also comes with risks. According to Patrick Meagher, a CGAP consultant focused on regulation related to digital finance, there are three different types of challenges, starting with data protection, as mentioned by Ana Maria earlier.

Patrick Meagher: These platforms are highly data intensive, of course. That that's almost their currency, you might say. The rules about consent for use of customer data, that management of customer data, the protection of data raise a lot of issues and, and create, risks that we've seen you know things that have happened in some of the countries that we work in.

Secondly: competition. So, platforms are based on network effects. And so, the bigger, the better, the more links, the more nodes, the better. And so with a big tech both data and network effects and the risks, the competition of a growing increasingly dominant platform are, you know, quite significant.

There's a third risk that is I'm not sure is so widely recognized and addressed. And it's that because platforms that have, that have originated in sectors that are not the financial sector would include e-commerce sites, social media platforms and ride hailing companies.

When finance is combined with these other products and services that creates certain risks having to do with the need for a distinctive treatment by regulators of financial services. But when they're owned or controlled or effected by a nonfinancial enterprise or entity, this raised a concern through history, right? And often the ownership of those two types of entities is kept separate, sometimes it's not. But so in the value chain of financial services in this platform setting the value chain runs through both financial. And non-financial entity. Sometimes it might not reach a financial entity.

It might be a credit extended by the e-commerce platform, in which case, there might not be a financial regulator involved and there may not be a need, but often there is, so because there are activities that are beyond the financial sector that are, that are you know, raising the need for finance and that are affecting the use of it and the, and the risks to the customer and to the system, generally, a financial regulator might not have good visibility over say the transport sector where an entity like Go-Jek or GRAB is, is operating. So, there's potential set of risks that can carry over into the financial sector, that's not necessarily well understood or very visible to the financial regulator.

Sai Krishna Kumaraswamy: Introducing a level of regulation that can protect customers without curbing business innovation of business can be tricky. Ana Maria shares some initiatives that the Superintendencia Financiera is taking to try and try and strike the right balance.

Ana Maria Zuluaga: We have top of mind, the great experiences of work in UK and Singapore, Australia and what we see, the first thing is the openness. We are very open and it's the change of mindset of that the financial supervisor, the regulatory entity, or the authorities regarding the financial ecosystems are very formal and you can speak, we can share ideas, you can make share a different approach. That is the first thing that we take in mind.

And that is why four years ago, I think five years we create a group that is our innovation office, but it is more than an innovation. We talk with the ecosystem. even when we see a different model that we don't understand, we go there and, and hey, can you tell me about that? Great, or they, and they come to us and hey, I have a new idea. Will you wanna listen to us? Of course. The this, this change of the mindset of how the relationship works was the first thing.

And the second one is take important regulatory tools to test pilots. The sandbox are great tools we have here in Colombia. We have two sandboxes: supervisory sandbox and our regulatory sandbox. So, these spaces have been great to prove different kinds of services, product that sometimes we, we, we come with the, with the idea, but mostly there are the third parties.

Sai Krishna Kumaraswamy: The Superintendencia Financiera’s approach seems to clearly be spurring innovation in Colombia, but Ana Maria points to the limitations in human and technical resources, given the fast evolution of business models and technology, in cultivating even more innovation.

Despite the challenges mentioned so far and the risks, embedded finance is set to continue - though it will look different across regions depending on who is driving it… mobile money providers, e-commerce companies, super apps like Grab, and others.

To ensure the potential benefits are realized, the right regulations will be crucial. Efforts to close the digital divide will also be key to ensure more women, people in rural areas, and other groups can access and use the phones, data plans, and other things required for digital finance. The potential is there to write the next chapter of the financial inclusion story, one marked by not just the broadening but the deepening of financial inclusion.

Peter Zetterli: I think embedded finance will definitely be a game changer, just like mobile money was able to rapidly scale up access to financial accounts and to payments for people. Embedded finance holds out the promise of rapidly scaling up access to a wider range of services. And I can see very compelling reasons from the commercial players, from the regulators and from the funders all to support that development in different ways. So, I expect that's what we're going to see.

Sai Krishna Kumaraswamy: So Yasmin, what's your hope for embedded finance? Do you agree with experts who predict that it will define financial inclusion for years to come?

Yasmin Bin-Humam: Well, I definitely see the potential for it to do so, but I'm of two minds. Personally, I'm curious to track the evolution of embedded digital credit, because credit is a major constraint for small business owners and agricultural producers who don't meet traditional collateral requirements or have formalized businesses that would qualify them for government programs. And so to have a platform that helps them prove they have a good product and a good client base to a credit provider who can use alternative data, that would really make a difference.

Sai Krishna Kumaraswamy: You mentioned you were of two minds. What gives you pause?

Yasmin Bin-Humam: So on the other hand, the assumption is that everything and everyone is going online, and that will only happen with really concerted efforts to close the digital divide. And I feel like we're nowhere near that yet, so we can't put the cart before the horse.

Sai Krishna Kumaraswamy: Can't agree with you more.

Thank you for tuning in to the Inclusive Finance Frontiers podcast from CGAP. If you enjoyed this episode, please subscribe to our podcast and spread the word among your networks. Special thanks to our episode guests, my co-host Yasmin Bin-Humam, the CGAP podcast production committee, and CGAP's production partner, Volubility Podcasting.